Health Care Experts Explore Value-Based Drug Pricing

Value-based prescription drug pricing is an idea that is gaining traction among health care leaders.

Should prescription drugs be priced based on how well they work? Tying drug pricing to value is an idea that’s gaining steam among health care experts.

But what does this look like in practice? How would the relative value of a given drug be determined? How would it impact care? Questions like these were the focus of a recent Alliance for Health Reform public panel discussion, which explored the topic from the perspective of health care economists, patients, drug manufacturers, and pharmaceutical benefit managers. Dr. Will Shrank, CVS Health’s Chief Scientific Officer and Chief Medical Officer, Provider Analytics and Innovation, was on hand to provide our perspective as a pharmacy benefits manager (PBM).

For health care economists like Steve Pearson M.D., from the Institute for Clinical and Economic Review, value-based payments have the potential to reduce excessive or wasteful spending. This is important, he noted, because exploding health care spending usually means state and federal governments must cut budgets for other societal needs such as education and infrastructure. He contends that in pricing drugs, we should be considering the value they add and compare that to the incremental cost over the short- and long-terms. Rewarding added value creates incentives for innovation.

From the patient’s perspective, AARP’s Leigh Purvis explained, health care value perceptions are influenced by a number of factors that include education and lifestyle, severity of their health conditions, access to care and cost-effectiveness. Value for health care dollars will continue to be an important topic, with nearly 60 percent of all U.S. adults taking at least one prescription drug and 15 percent taking five or more.

The question of value-based drug pricing is clearly one that pharmaceutical makers take great interest in. National Pharmaceutical Council representative Robert DuBois M.D. explained that for manufacturers, defining value is a complex proposition that can’t simply be boiled down to benefits and costs. Given all of the variables at play, there are many different ways to decide what outcomes matter and over what time period. From the drug makers’ perspective, he shared that the definition of value is influenced by the high costs associated with research and development of new drug therapies as well as future patent expirations.

From a payer’s perspective, Dr. Will Shrank shared that CVS Health defines value by how well prescription drugs achieve cost savings and improve patient care and outcomes. One of the most important things a PBM can do, he explained, is to ensure that patients get the right drug for the lowest cost. The strategies CVS Health employs to do this include negotiating the best prices and promoting the use of highly effective generics. Promoting and improving medication adherence is also critical, since a drug can’t be effective if a patient doesn’t take it.  

The discussion reflected the generally broad agreement among health care stakeholders that rewarding value is a good thing, but acknowledged that the definition of “value” varies. While it’s clear that there is no single, one-size-fits-all approach to value-based pricing, the experts agreed on the importance of developing models that serve different geographies, medical conditions and patient populations.